There are two possible adverse effects of FDI on a host country's balance of payments.These are:

Question

Quizplus · Accepted Answer

Repatriation of profits refers to the situation where the foreign-owned companies operating in the host country repatriate their profits to their home country. This would result in a deficit in the host country's balance of payments. Inputs from abroad refer to the situation where the foreign-owned companies import their inputs from their home country instead of using the locally available inputs. This would result in a surplus in the host country's balance of payments. Therefore, the adverse effects of FDI on a host country's balance of payments are repatriation of profits and inputs from abroad.

There Are Two Possible Adverse Effects of FDI on a Host